Former TruServ CEO's severance tops $1.5 million

Hoye won't file age-bias lawsuit

Donald Hoye may have departed in the midst of the worst financial crisis in TruServ Corp.'s history, but that didn't prevent him from receiving a severance package worth more than $1.5 million.

Hoye, who served as chief executive of the hardware-buying cooperative when more than $100 million in accounting errors were discovered, is receiving $1.3 million in "salary continuation" over two years, vacation pay of $82,500 and annuity payments of $150,000.

TruServ also is providing him medical benefits and outplacement services consistent with "similarly situated corporate officers."

Details of Hoye's termination agreement were contained in TruServ's delayed 2001 10-K filing with the Securities and Exchange Commission. Hoye, 53, resigned in July after a 30-year career at TruServ and a predecessor company, ServiStar.

TruServ immediately launched a search for a successor that ended in November when Chief Financial Officer Pamela Forbes Lieberman was named CEO.

Although Hoye's severance package isn't huge by standards at publicly traded companies, the payout comes as TruServ posted a $50.7 million loss for 2001. That means 7,000 True Value Hardware storeowners--TruServ's only shareholders--will not be receiving annual "patronage dividends" for the second time in three years.

They also cannot cash out their shares in TruServ until at least 2004 under the terms of a new lending agreement.

In exchange for the money and benefits provided to him, Hoye has agreed not to sue the co-op for age discrimination, disclose confidential information or make disparaging statements about TruServ.

He also agreed not to work for, consult with or invest in any hardware co-op, wholesale company or franchise with sales in excess of $1 billion. Hoye is permitted, however, to recount "his professional accomplishments while employed by the company for the sole purpose of obtaining future employment," according to the agreement.

Last year, Hoye received a $417,500 bonus, on top of his $500,000 salary, for the year 2000, when TruServ turned a profit.

Meanwhile, TruServ still is battling with a former high-ranking officer who departed the company in late 1998.

Paul Pentz, a former president of TruServ, has sued the co-op in Florida, claiming he is due additional bonus and retirement compensation.

TruServ has filed a counterclaim alleging Pentz breached his fiduciary duties. A trial is to begin next month.